Purchased supplies on account

1. How does the purchase of supplies on account affect the accounting equation?

assets increase; owner's equity decreases

assets increase; liabilities increase

assets increase; liabilities decrease

liabilities increase; owner's equity decreases

2. Which of the following is not a true statement about the accounting equation and its elements?

The accounting equation is Assets = Liabilities - Owners' Equity.

Assets are the resources a business possesses.

Liabilities represent debts of a business.

Examples of assets are cash, land, buildings, and equipment.

Owners' equity are the rights of the owners.

3. For accounting purposes, the business entity should be considered separate from its owners if the entity is

a corporation

a proprietorship

a partnership

all of the above

4. Which of the following are guidelines for behaving ethically?

I. Identify the consequences of a decision and its effect on others.

II. Consider your obligations and responsibilities to those affected by the decision.

III. Identify your decision based on personal standards of honesty and fairness.

I and II.

II and III.

I and III.

I, II, and III.

5. The payment for the monthly rent will require the following entry

Debit Cash and Debit Rent Expense

Credit Cash and Credit Rent Expense

Debit Rent Expense and Credit Cash

Credit Rent Expense and Debit Cash

6. Randomly listed below are the steps for preparing a trial balance:

(1.) Verify that the total of the Debit column equals the total of the Credit column.

(2.) List the accounts from the ledger and enter their debit or credit balance in the Debit or Credit column of the trial balance.

(3.) List the name of the company, the title of the trial balance, and the date the trial balance is prepared.

(4.) Total the Debit and Credit columns of the trial balance.

(3), (2), (4), (1)

(2), (3), (4), (1)

(3), (2), (1), (4)

(4), (3), (2), (1)

7. Prairie Clinic purchased X-ray equipment for $4,000, paid $1,275 down, with the remainder to be paid later. The correct entry would be

Equipment 1,275

Cash 1,275

Cash 1,275

Accounts Payable 2,725

Equipment 4,000

Equipment Expense 4,000

Accounts Payable 1,275

Cash 2,725

Equipment 4,000

Accounts Payable 2,725

Cash 1,275

8. A credit balance in which of the following accounts would indicate a likely error?

Fees Earned

Salary Expense

Janet James, Capital

Accounts Payable